EMN

As a follow-up to our blog post from earlier today covering the reasons to “avoid Eastman Chemical Company (NYSE:EMN),” we took another perspective into EMN’s profitability and stock performance relative to its peers. In the last 10 years, the company’s Economic Margins (EMs) have lagged its competitors, especially in the last 2 years as shown in the chart below. If you pay close attention to the recent EM levels of EMN and DOW (both lagging DD and FMC) that have both been struggling, the fact that EM levels are so closely correlated with market performance it is no surprise that in the bottom chart that EMN and DOW both have greatly underperformed DD and FMC year-to-date.

At The Applied Finance Group’s (AFG’s) client conference this year we introduced a new session called “10 Stocks To Avoid” to provide some actionable ideas to attendees of the conference. So far this portfolio is performing as expected with many of the stocks we recommended avoiding down more than their benchmarks since the conference on June 11, 2010. One of the stocks we recommended avoiding is Eastman Chemical Company (NYSE:EMN) as it looks unattractive according to several criteria AFG uses in its stock selection process.

Bloomberg provides a score for companies within the S&P 500 based on an average of all analyst ratings from the street. Below is a table highlighting companies with the best analyst ratings, largest increase in rating, highest price targets, and worst analyst ratings and the valuation attractiveness of each of these companies based on The Applied Finance Group’s (AFG) valuation model.

Companies within each of these groups are ranked from most attractive from a valuation perspective to the least attractive. VE.com will actively track the performance of these recommendations and see how they stack up to the analyst recommendations in each group. AFGview.com, AFG’s professional investor website allows you to compare any company using their rating versus the consensus ratings of the sell side. If you are interested in an analysis on a specific company, contact afgsales@afgltd.com.

 

Best/Worst Analyst Rated Companies (Bloomberg)

 

AFG's Valuation Model – Using AFG’s modified discounted cash flow model to measure the intrinsic value of a firm compared to its peers. AFG's Value Score - A score which represents the ranked percent to target (deviation between stock’s current trading price and AFG’s current default target price) or attractiveness (upside) relative to the universe. A Value Score of 100 is the most undervalued and 0 is the most overvalued company in the universe.